The financial services firm facing accusations that it promotes Israel boycotts relies on research produced by “a leader” in the anti-Semitic Boycott, Divestment, and Sanctions movement (BDS) and other anti-Israel sources, according to an analyst tracking the situation.
The research arm of Morningstar Inc., a firm that advises investors, relies on research produced by a pro-BDS organization called Who Profits, which is known to push Israel boycotts, according to Richard Goldberg, a former U.S. national security official and Middle East expert who recently published an independent analysis on the matter for the Foundation for Defense of Democracies think tank.
“Morningstar’s ratings system uniquely relies on a group that’s at the forefront of the BDS movement to blacklist Israel-connected companies,” said Goldberg.
Who Profits “maintains a public database of businesses that are often targeted in international BDS campaigns,” according to NGO Monitor, a watchdog group that monitors pro-BDS outfits. The reliance on Who Profits and other anti-Israel groups, such as Amnesty International and Human Rights Watch, is raising questions about Morningstar’s commitment to rooting out anti-Israel bias in its ratings products, Goldberg said.
Sustainalytics employees interviewed as part of the White & Case report indicated that Who Profits “was used primarily for background information, and was consistently balanced against other sources.” Others said the relationship is deeper, with Sustainalytics “research analysts often rely[ing] upon Who Profits for what they view as unique, boots on-the-ground research regarding corporate involvement in the region, in part because Who Profits is one of the few organizations that actually operates on the ground in the Israeli/Palestinian conflict areas.”
Sustainalytics ratings products also rely on information produced by Amnesty International and Human Rights Watch, which have faced accusations of anti-Israel bias and of unfairly labeling Israel as an apartheid state.
The Washington Free Beacon previously reported on concerns that Sustainalytics may place a company on its investment “watchlist” for the “supply of arms” to Israel or other nations involved in conflicts. By downgrading companies that supply the Israel Defense Forces, for instance, Sustainalytics could be relying on metrics that negatively impact Israel more than others.
“As the NGOs leading the BDS movement increasingly try to manipulate CSR firms into advancing their agenda, these firms must be vigilant in vetting these sources,” Steinberg said. “Corporate due diligence is vital to ensure that ratings under the facade of human rights are not based on false claims by ideological activists and organizations.”
A Morningstar spokesman would not address questions related to Sustainalytics’s reliance on Who Profits, but said the company does not in any way endorse or support the BDS movement. Morningstar also said in recent months that it is discontinuing certain services that were found to unfairly target Israel and adjusting others to remove instances of anti-Israel bias.
The White & Case report “makes clear that built-in bias against Israel infects Sustainalytics’ methodology and sources, and thus, its other ESG ratings products,” the Jewish group wrote in a letter sent to Morningstar’s top executives. “This bias is not only unfair and harmful to Israeli companies and those doing business in and with Israel, but such bias also threatens to tarnish the ESG ratings framework itself.”
“Morningstar should take the opportunity to cleanse its products of all anti-Israel bias and set an example of fairness and reliability for all companies providing ESG ratings, which represent one-third of dollars managed globally,” the organization said, echoing concerns from others in the pro-Israel advocacy world.
“We now have a mountain of evidence that Morningstar’s ESG subsidiary is engaged in a boycott of Israel through its sources and methods,” Goldberg said. “It’s time for states and Congress to intervene.”